Log in/Register

Please log in or register to continue. Registration is free and requires only your email address.

Log in

Register

Emailrequired

PasswordrequiredRemember me?

Please enter your email address and click on the reset-password button. You'll receive an email shortly with a link to create a new password. If you have trouble finding this email, please check your spam folder.

"An end to the euro would indeed provoke an immense crisis."
Why ???? What happened when the gold standard or Bretton Woods blown in the air? None of the feared and prophesied disasters.
Uk in 1931 and US 1933 emerged happily from the end of the Gold Standard, supposed to be: "the end of Western civilization"
http://www.bloombergview.com/articles/2013-03-21/how-franklin-roosevelt-secretly-ended-the-gold-standard
http://www.telegraph.co.uk/finance/commodities/11330611/How-the-Bank-of-England-abandoned-the-gold-standard.html
Same goes with Italy and UK exiting from the EMS in 1992
The € has provoked and is still provoking an immense crisis: time to put and end to the € nightmare.

we'd all agree that big fixes are needed for the dysfunctional current system but it would be more constructive and realistic to propose than dispose as the end of the Euro is not really an option (funny some UK economists don't seem to even consider the huge impact it would have also on the UK)
The p.o.v. expressed are also very "macro". Living in the micro-economy, we see very significant benefits of the Euro for European and international companies. That helps develop business, creates jobs, facilitates X-borders research projects etc.... it's not all bad! And going back would be very very regressive in the real world...

I agree the Euro was a mistake but I believe a “whatever it takes” approach will be adopted to avoid admitting such a macroscopic failure. After all, America is doing the same: when QE1 didn’t work they launched QE2 and QE3, despite little evidence of widespread real economic growth.
As failure to reach parity on the €/$ seems to indicate, it’s a bit like a game of hot potato: if the debt bomb explodes on the other side first, you can always blame them for the ensuing disaster. Or better still, the spark may come from China’s stock and property bubble or from one of the many areas of geopolitical instability (Ukraine, Russia, Middle East).
With so many potentially catastrophic risks out there, buying time may be a more tempting choice than addressing the problem.

Last year, K. O’Rourke accurately wrote the following
[ http://www.imf.org/external/pubs/ft/fandd/2014/03/orourke.htm ]: “Europe is now defined by the constraints it imposes on governments, not by the possibilities it affords them to improve the lives of their people. This is politically unsustainable”. Since “muddling through” seems no longer possible, he reported two alternative, opposite solutions: “jump forward to a federal political Europe [where the single currency survives], on whose stage left and right can compete on equal terms”, or “return to a European Union without a single currency and let individual countries decide for themselves”.

In my opinion, a third way should be devised, so as to fight, as efficiently as possible, both the “status quo” and the “reformist” ideas of Schauble et al, those of Hollande et al
[ http://www.lejdd.fr/Politique/Francois-Hollande-Ce-qui-nous-menace-ce-n-est-pas-l-exces-d-Europe-mais-son-insuffisance-742998 ] and the resulting “franco-german consensus” that will probably emerge sooner or later – which seem to meet the well-known “Leopard’s principle” (if we want things to stay as they are, things will have to change). Two decades after the Maastricht Treaty, a completely novel EU treaty is mandatory – not a mere set of “positive” , incremental amendments -, so as to develop a New European Project, under essential democratic principles, and avoid a sad situation, in the near future, where the foreseen “European common home” becomes replaced by a true “European house of correction”. We need to build a true, democratic European Union through a “cooperative European disunion”, where the Euro survives as a “common”, parallel currency – including for the United Kingdom and the other non-Euro states – but no longer as the single currency for a fraction of the EU (currently 19 out of 28 member states).

As proposed three years ago by some European Citizens [ http://building-a-true-european-union.blogspot.com ],

– The Euro should be a COMMON currency within the future EU – including the EU members outside the current ‘Euro Area’ – but not necessarily the SINGLE currency.
– In this context, the coexistence of TWO parallel currencies should be allowed in each EU member state (under certain conditions, established in a novel European Treaty), within the framework of an appropriate “Cooperative European Disunion” .
- Besides the “Common Euro”, the complementary currency in each member state could be either a “national currency” (…) or a completely new currency, shared by that member state and some other “compatible” EU member states, taking into account both the relevant macroeconomic issues and appropriate geographic, historic and cultural issues.

This solution could be a flexible basis for a future EMU-LTE (Economic and Monetary Union – Long Term Evolution ), with several stages; in an advanced stage of the EMU-LTE, the euro could be – at last! – the single currency in a fiscally and politically unified democratic EU. I believe that this extremely concise (but not modest) proposal could be a good basis for the required, flexible and realistic, “Plan B” – jointly saving the Euro and the European people.

In this context, a detailed treatment of the “common currency” issue should be carried out. An interesting approach was proposed in
http://blog.mondediplo.net/2013-05-25-Pour-une-monnaie-commune-sans-l-Allemagne-ou-avec

In principle the no-bailout clause should imply that an unsustainably indebted government must be able to go bankrupt. Isn't it moral hazard of Schäuble to insist otherwise? A Greek default and restructuring inside the Eurozone would be a motivation to worry about the excessive trade surplusses, especially when they are invested in asset bubbles in deficit countries, in stead of capacity for profitable and productive activity. No bailout means definite default.

How can it be the job of a central bank to ruin the financial payment system of a whole country?
Why should the ECB do this to enforce a questionable 'no-default rule' that encourages moral hazard of investing banks/funds?
I wonder what the EU court of justice would say to this. Too many contradictions.

As it is the euro monetary system is indeed a failure. On the other hand reforming it by restoring the appropriate degree of monetary autonomy on a country-by-country basis (via parallel national quasi-currencies) would work and would avoid a breakup as well as a financial crises. http://bastaconleurocrisi.blogspot.it/2015/05/tax-credit-certificates-fixing.html?m=0

To my knowledge (the Professor will know this much better than I) there has never been a successful monetary union that wasn't comprised of highly similar economies with similar economic cycles. In the early 2000's there was a lot of clamour regarding New Zealand's overvalued exchange rate and whether a currency union with Australia would be a solution. Work was done by the NZ Reserve Bank who concluded it would not. Thank God. New Zealand's terms of trade have recently turned against it, powered to some extent by the removal of the CAP restrictions on milk supply in Europe. Dairy prices internationally have plummeted and so has the exchange rate: by 26% against the US dollar since mid last year. What has this got to do with Greece? It demonstrates the ability of an economy to adjust when it is not constrained by its exchange rate. Greece has suffered an internal devaluation of over 25%, which is in some quarters expected to stimulate an export-led recovery. But how can that be, when a very large chunk of your market comes from other EMU countries, who might already think the services are not that cheap, and that was before the VAT rise to 23%. Tourists from other parts of the world don't necessarily think these peripheral countries are cheap anymore, as prices within the EZ converge. So the Greeks have suffered a massive reduction of income without the benefit of gaining a more competitive position. And the good governance issues (overmanning in the public sector) will be worked on and sale of excessive and poorly performing public assets will happen, and proceeds go to repaying debt, rather than providing capital for fresh productive investment. It's not an attractive proposition.

Kevin is right of course. Recent events have only reinforced the unsustainable nature of the deeply flawed EMU.
But there is another aspect missing from his and most analyses. The EMU is a terrible construction for ordinary citizens, but for the looters of the neoliberal Capital owning classes it is the perfect device to take usback to 19th C levels of inequality & relative poverty (even not so relative poverty for some).
What we've seen, completely burying any notion of EU 'Solidarity' or social cohesion, is neoliberal right wing politics conspiring or aquiescing in the destruction of a member country without any challenge or counter balance in sight. A Central Bank operated by foreign & highly politicised officials, in reality unaccountable to anyone.
The problem in the EU is only superficially the EMU. It's real problem is the neoliberal political coup, rendering countries' democratic processes even more worthless than they already are in actually representing (majority) citizens' interests.
Sure, Germany is the EMU absurd perma-exporter and thus holds de facto Power - at King Schauble's Court. But it is still oppressing its own Labour classes, and the Elites of other member countries are more than happy to collude with this underlying agenda.
It never is about nation vs nation, except where elites themselves squabble over resources.
The one good thing to come out of Syriza's humiliation is that EU authorities and Elites have revealed their true motivation quite transparently to millions more ordinary citizens. As Varoufakis has also confirmed, the last 6 months, from the Troika side, was never about 'economics' at any stage - simply raw Power politics, utterly contemptuous of any meaningful democratic representation of ordinary citizens' interests anywhere.
The proof of this? Because any deal like this that destroyed any prospects for growth, also means it is far less likely Greece's creditors will get anything. But it is now (after previous bailouts for this purpose) largely only public funds at risk, not private/banks etc., so the Troika couldn't care less. Again, we see confirmed zero concern for interests of majority citizens. ie no meaningful democracy.

Correction - when you say "no textbooks" predicted this, you should add "European." Everyone in America knew this was coming.

If there is a no-bailout clause, what do you think is going to happen to a crisis-struck economy? It's about as tricky as figuring out the sum of angles in a triangle. But then, as you point out, economists in Europe self censor. So there's not much point in discussing it.

The time to complain about shutting down a member state's banking system was in 2013, when it was first tried and Dijsselbloem identified that as "a template." Anyway, better late than never.

To be honest, as a young school student I couldn't understand how you could have EMU and yet different governments. Imagine taking 20 companies and saying to them - run your own company, and keep your own shareholders - but we are going to share profits! Crazy!

This Irish guy was a Eurosceptic even before he became an academic economist.
I've no idea why PS is piling up with ALL these Anglo-Saxon academic nonsense here against Europe Project. Based in NY, are part of the devil that's trying to undermine Euro?

A development taken place in Project Syndicate is worrisome for Europeans like me. Day to day we have to read articles of fierce opponents against euro or eurocountries or Germany. Once again we have here a person who has opposed euro for years not understanding that it takes lot if time to stabilize euro and to deepen European integration.

Without One Single Language and One Single Capital, the absence of Investment Equalization Templates will create any number of Greece's despite apparently free migration and full mobility. With a Virtual Central Bank trying to impose a Virtual Central Currency, European Monetary Union only guarantees European Political Disunion. The Professor rightly visualizes ever increasing costs to dismantling the charade, and the recommended early termination of a cancer that he diagnosed as fatal appears to be brutal - but predicaments like these require wisdom and capacity to be gathered for implementation without further enhancements in consequential damages. All examples of Unions that have sustained - United States, United Kingdom, Australia, etc - have One Language, One Capital, One Real Central Bank, One Real Currency. No wonder each of the Four Currencies of The Anglosphere have become IMF hard currencies.

See also:

In the first year of his presidency, Donald Trump has consistently sold out the blue-collar, socially conservative whites who brought him to power, while pursuing policies to enrich his fellow plutocrats.

Sooner or later, Trump's core supporters will wake up to this fact, so it is worth asking how far he might go to keep them on his side.

A Saudi prince has been revealed to be the buyer of Leonardo da Vinci's "Salvator Mundi," for which he spent $450.3 million. Had he given the money to the poor, as the subject of the painting instructed another rich man, he could have restored eyesight to nine million people, or enabled 13 million families to grow 50% more food.

While many people believe that technological progress and job destruction are accelerating dramatically, there is no evidence of either trend. In reality, total factor productivity, the best summary measure of the pace of technical change, has been stagnating since 2005 in the US and across the advanced-country world.

The Bollywood film Padmavati has inspired heated debate, hysterical threats of violence, and a ban in four states governed by the ruling Bharatiya Janata Party – all before its release. The tolerance that once accompanied India’s remarkable diversity is wearing thin these days.

The Hungarian government has released the results of its "national consultation" on what it calls the "Soros Plan" to flood the country with Muslim migrants and refugees. But no such plan exists, only a taxpayer-funded propaganda campaign to help a corrupt administration deflect attention from its failure to fulfill Hungarians’ aspirations.

French President Emmanuel Macron wants European leaders to appoint a eurozone finance minister as a way to ensure the single currency's long-term viability. But would it work, and, more fundamentally, is it necessary?

The US decision to recognize Jerusalem as the capital of Israel comes in defiance of overwhelming global opposition. The message is clear: the Trump administration is determined to dictate the Israeli version of peace with the Palestinians, rather than to mediate an equitable agreement between the two sides.